Sales of new US homes unexpectedly tumbled in September, their first drop in six months, underscoring the hazards to an economic recovery that businesses appeared to be banking on.
New single-family home sales fell 3.6 per cent to a 402,000 unit annual pace from a downwardly revised 417,000 units in August, the Commerce Department said today.
A separate report from the Mortgage Bankers Association today showed demand for mortgages has fallen for the past three weeks as buyers move to the sidelines ahead of the November 30th expiration of a popular home-buyers' tax credit.
The housing data represented a road bump in a recovery that otherwise appears to be widening. Another report from the Commerce Department showed that new orders for long-lasting US manufactured goods rose 1 per cent in September as business stepped-up investment plans.
"One month is obviously not a trend and I think there is plenty of evidence that things are turning around. I still believe the economy has hit bottom and is on the way up, but it will be a long, slow process," said Mark Bonhard, an investment advisor at Dawson Wealth Management in Cleveland, Ohio.
US stock indexes extended losses when the data was released, while US Treasury prices added to gains and the US dollar rose against the euro.
Despite the drop in sales, the number of new homes for sale at the end of the month shrank to its smallest in 27 years, leaving the supply of homes available at 7.5 months' worth.
The median sales price rose in September to $204,800 from $199,900, while the average sales price rose to $282,600 from $265,500.
The new home-buyer tax credit affected recent housing market trends, Cary Leahey, economist at Decision Economics in New York, said.
The $8,000 credit, which expires on November 30th, helped lift the housing market from its deepest downturn since the Great Depression. US politicians are considering extending it.
The Mortgage Bankers Association said its mortgage applications index fell 12.3 per cent to 562.3 in the week ended October 23rd, with purchase applications the weakest since mid-May and refinancing requests at a two-month low.
Eligible borrowers who applied last week would unlikely be able to close their loan by the scheduled November 30th expiration of the tax credit, industry experts said.
The increase in new orders for long-lasting US manufactured goods met Wall Street expectations and was the second increase in the last three months, offering some hope that the economic recovery will continue.
However, compared with a year ago, orders were down 24.1 per cent.
"In a recovering economy, you'll get three steps forward and then two steps back. That's what you're seeing here," said David Katz, chief investment officer at Matrix Asset Advisors in New York.
Durable goods orders are a leading indicator of manufacturing, which in turn provides a good measure of overall business health.
Reuters